How 21,000 Wealthy Americans Avoided Paying Income Tax

The richest woman in Wisconsin, Diane Hendricks, is worth an estimated $2.8 billion, but she did not pay a dime in state income tax in 2010, the Milwaukee Journal-Sentinel first reported.

Because of a change in how her company, ABC Supply Inc., the country’s largest distributor of roofing, windows and siding, is structured, Hendricks reduced her personal state income tax burden from $2.3 million in 2009 to zero in 2010, according to records the state Department of Revenue released to the Journal-Sentinel.

And Ms. Hendricks is not alone.

A recent IRS report showed that 20,752 households that reported earning more than $200,000 in 2009 paid no federal income taxes. About 1,500 of those tax-free Americans were millionaires.

So how does someone in the top 3 percent of America’s income earners finagle their income tax burden down to zero? For the majority of them, it’s all about donating to charity, investing in local and state governments, earning money overseas and writing off doctor bills.